Equities
Equities represent ownership stakes in companies. Banks facilitate equity investing for retail and wealth clients through brokerage services, custodian accounts, and margin financing — covering listed shares on local and international exchanges.
📌 Key Concepts
| Term | Definition |
|---|---|
| Share / Stock | A unit of ownership in a company |
| Dividend | Periodic cash distribution from company profits to shareholders |
| Market Capitalisation | Total market value of a company's outstanding shares |
| P/E Ratio | Price-to-Earnings ratio; share price divided by earnings per share |
| Bid / Ask | Best available buy price and sell price in the market |
| Lot Size | Minimum tradeable unit (e.g. 1 lot = 100 shares on SGX) |
| Settlement | Transfer of shares and cash on the market's applicable settlement cycle |
| Corporate Action | Events affecting share structure (dividends, rights, splits, etc.) |
🏦 Bank's Role
- Brokerage: Execute buy/sell orders on behalf of clients via exchange or OTC
- Custody: Safekeep client shares in nominee or direct account
- Margin Financing: Lend clients funds to buy more shares than their cash balance allows
- Research: Provide equity analysis and recommendations to wealth clients
- Corporate Actions Processing: Handle dividends, rights issues, splits on behalf of clients
🛠️ Trade Workflow
Buy Order
- Client submits buy order (market or limit) via internet/mobile trading platform or relationship manager
- Bank routes order to exchange (e.g. SGX, NYSE, HKEX) via direct market access or broker network
- Order matched at exchange; trade confirmed with execution price and quantity
- Trade booked to client account; shares held in nominee/custodian account
- Settlement occurs on the applicable market cycle: cash is debited and shares are credited through the custody chain
- Trade confirmation sent to client
Sell Order
- Client instructs sell; bank verifies sufficient shares in custody
- Order routed to exchange; matched at execution price
- Shares debited from the custody account on the applicable settlement date
- Cash proceeds credited to client account (net of brokerage commission and charges)
- Contract note issued
📋 Corporate Actions
| Action | Description | Bank Processing |
|---|---|---|
| Cash Dividend | Company pays cash per share | Credited to client account on payment date |
| Scrip Dividend | Option to receive dividend as new shares | Client elects; shares credited if opted |
| Rights Issue | Existing shareholders offered new shares at discount | Bank notifies client; processes subscription or renunciation |
| Bonus Issue | Free additional shares issued to existing holders | Shares automatically credited |
| Stock Split | Shares subdivided (e.g. 1 share → 2 shares at half price) | Account adjusted automatically |
| Merger / Takeover | Company acquired; shares exchanged or bought out | Bank processes per scheme terms |
🧮 Key Calculations
Brokerage Commission
Commission = Trade Value x Commission Rate
Minimum commission applies if result is below threshold
Example: Buy 10,000 shares at SGD 2.50 = SGD 25,000 trade value
Commission at 0.28% = SGD 70.00
Margin Ratio
Margin Ratio = Client Equity / Market Value of Portfolio
Maintenance margin typically 140% (varies by collateral type)
Example: Portfolio market value = SGD 100,000
Client equity = SGD 40,000 → Margin ratio = 40%
If ratio falls below threshold → margin call issued
Dividend Yield
Dividend Yield = Annual Dividend Per Share / Share Price x 100
Example: Share price SGD 3.20, annual dividend SGD 0.12
Yield = 0.12 / 3.20 x 100 = 3.75%
📋 Compliance & Controls
- Client suitability assessment before trading complex or leveraged products
- Know Your Customer (KYC) and Customer Due Diligence (CDD) at account opening
- Short sales on SGX must comply with applicable marking, reporting, settlement and market-conduct requirements
- Insider trading controls: watch list and restricted list maintained; pre-clearance required for designated persons
- Securities dealing is subject to the Securities and Futures Act, applicable MAS requirements and SGX rules
- Trade surveillance for market manipulation, front-running, and wash trading
- Margin accounts subject to daily mark-to-market and automated margin call triggers